A Government Actuary’s Department (GAD) expert has co-authored a major new report which calls on actuaries, policymakers and financial institutions to treat nature loss as a serious economic threat, not a secondary concern.
Georgina Bedenham, Head of Climate Risk and Disaster Risk Finance at GAD, contributed to ‘Tipping into the Wild Unknown’. It is the latest report in the Institute and Faculty of Actuaries (IFoA) Planetary Solvency series.
Nature risk
The report argues that nature is critical infrastructure, underpinning
- food systems
- water supply
- health
- climate regulation
- economic activity
While climate risk has gradually moved up the agenda, nature risk remains largely absent from the models and scenarios used by governments, regulators and financial institutions.
Deforestation leads to a range of issues. Credit Shutterstock
Disease and deforestation
The report highlights near-term risks already materialising through food systems, including soil degradation, water stress and pollinator decline. It also flags the threat of acute shocks, such as breadbasket failures and trade disruption, which drive price volatility and economic instability.
Zoonotic disease risk features too, with deforestation and land-use change increasing the likelihood of animal-to-human disease spillover, as the COVID-19 pandemic illustrated.
Looking further ahead, the report warns that ecosystem tipping points, such as coral reef or pollinator collapse, could produce irreversible damage on human timescales.
Climate and biodiversity
As the report’s co-authors acknowledge, nature risk is a financial and societal risk, affecting inflation, supply chains, health outcomes, and credit and market risk.
Climate-only modelling is no longer considered fit for purpose, given the interdependencies between climate change and biodiversity loss.
Commenting on the publication, Georgina said “The report encourages actuaries to engage with emerging biodiversity metrics and quantification tools.
“Among other aspects, it also asks actuaries to consider qualitative, narrative approaches to risk management as a complementary approach to traditional quantitative methods. We need to embrace the uncertainty because integrating nature into decision-making is no longer optional.”
Georgina Bedenham is discussing the report in the latest episode of The Actuary podcast.